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1. Opportunity Identification
Older people sit down and ask, “What is it?”, but the boy asks, “What can I do with it?”
- Steve Jobs, Co-founder and CEO of Apple and Pixar
Entrepreneurial opportunities become real when you have a solution that leverages
your advantages to solve an important problem for customers. This chapter
examines how to translate the approaches and tools of this book to act on real
entrepreneurial opportunities. The key elements of opportunity identification
are defining the problem, crafting a competitive solution, building your
advantage, and forming the right team.
The Opportunity Analysis Canvas: Emphasis on “Opportunity Identification”
Is the problem real?

2. What I mean by problem is a problem that you seek to solve in the market. It could
be an opportunity that you discovered.
What I mean by real is are there enough customers that really care about the
problem that you aim to solve? Is it something that you can build a business on?
An early question to ask to define the problem is who is your customer? This is the
first step to defining your market and understanding the problem. With this
knowledge, you can focus on assessing their needs. Focus on customer value first.
Why do they need your product? What benefits will they gain? Can they make
money or save money with your product? These are all questions to consider in
understanding the problem that you aim to solve.
Once this first round of problem-related questions are answered, the next questions
are: How many people experience these problems now? In the future? How many
buyers are there? Are there enough people who care about this problem for you to
be financially successful by solving the problem?
With the Opportunity Analysis Canvas, your assessment of the industries, markets,
competition, and value innovations are all very important to help answer this
question of who is your customer and how can you best serve them.
There are typically a few customers that will buy almost anything. You need to know
if there are enough customers, whether you have a real customer base, for you to be
successful. Understand how many people experience that problem, now or in the
future. When we forecast customer adoption of your product, note that not
everyone experiencing the problem will buy your product. While a number of
people may experience the problem, only a subset of them will place the economic
priority on it to pay for a solution. Of those paying for a solution, a subset of those
will choose your product over alternate solutions.

3. By illustration, we can consider two large universities in the U.S., Clemson
University and Florida State University. Each has a large student base, a large alumni
base, and a large fan base for their sports teams. Both do well at licensing and selling
merchandise that’s branded with their respective university names.
Now imagine a combination Clemson – Florida State sweater that is orange with a
partial tiger logo on one side, and burgundy with a partial Seminole logo on the
other side. Half of the sweater promotes one school and half promotes the other
school. This is a unique and differentiated product. But is there anyone who sees
value in it? Will that person be willing to pay for it?
To my knowledge, there’s only one person who would wear this sweater, Ann
Bowden. For a time, her husband was the head football coach of Florida State
University, and her son was the head football coach of Clemson University. When
the teams would play against each other once a year, she would wear a sweater that
was half for one school, half for the other school. It was probably made by her, or
made by a friend or family member.
Just because there is one person out there who is interested in that, doesn’t
necessarily mean that there’s a market opportunity that you should pursue in
mixed-school sweaters. That’s what I mean by, are there enough customers?
Now the question of how many is enough feels subjective. Is it single digits? Is it
thousands? Is it millions? It depends on your product and the product category. If
you’re developing a product at a low price point with low profit margins, you likely
need to sell tens of thousands or millions of these a year to build a compelling
business. Alternatively, if you’re Rolls Royce or Ferrari, you may need only 2,000
customers globally in a year to develop a profitable product. Your necessary volume
of customers is influenced by your financials and your cost structures.

4. In the pursuit of identifying real problems, I encourage you to validate the ideas that
you have through customer discovery. The best way to do that is to talk with
prospective customers at the start of the product development process. Engage with
customers before you build a prototype, and secure their insights early on.
Understand how they solve the problem that you’re addressing now. Ask, what
features matter? What would they pay for your solution? Use these insights to
understand if there is a real problem that’s worth your time to solve.
Does your solution create value for your stakeholders?
Stakeholders are individuals and organizations impacted by the product that you
bring to market. Your customers are stakeholders because they buy and use your
product. Your employees and advisors are stakeholders. Suppliers are stakeholders.
Investors are also stakeholders.
External stakeholders also influence the success or failure of your startup.
Communities, organizations, and the government may be stakeholders as well. Be
aware of your stakeholders before bringing your product to market. Anticipate
sources of support or resistance to your startup, and plan for how to navigate this
path successfully.
By illustration, what stakeholders influence the success of a physician? Consider a
small private medical practice where the physician is the owner and operator, and
an entrepreneur. Their patients are the primary customers. Without customers, in
this context the patients, this physician would be out of business.
Beyond patients, there are a variety of stakeholders that vary in their level of
influence and relationship with the physician. For example, there are often
prescriptions for medicine that physicians write. There are instruments that they
use for measuring your weight and temperature, as well as surgical instruments.

5. There are implantable devices, to include stints and pacemakers. The
pharmaceutical companies, the medical supply and device manufacturers, and the
distributors all play a role in healthcare.
The employers of the patients are stakeholders for the physician. In the U.S.,
healthcare costs are often subsidized by employers, provided that the physician
completes the appropriate certifications and paperwork. This relationship is
managed by healthcare benefits and insurance companies that have negotiated with
employers and physicians on the prices and protocols. Employers play a role in the
physician’s success as a source of funding for the patients’ treatments.
There are regulatory agencies, typically at the federal level, that establish the norms
of medical practice. What should the physician do in terms of treatment? What can’t
they do? When? At what price? Regulatory agencies, normally in the form of
government, play a large role in the success of physicians as well.
The networks in the hospitals that physicians either work within, or are affiliated
with, are stakeholders as well. There are various facilities, outpatient centers, urgent
care clinics, and public clinics that physicians are affiliated with as well.
In this context, we recognize that the most basic relationship is between the
physician and the patient. There is a broader set of stakeholders that play a role in
the success of physician. Particularly for physicians that own and operate private
practices as entrepreneurs, they need to be smart on the issues, the concerns, and
the values that are being provided to these diverse, influential stakeholders.
Entrepreneurs need to understand the role of stakeholders, and that the right
partnerships and collaborations can be tremendously helpful for startups. By
considering the impacts that your startup will have on stakeholders, you can
develop a solution that maximizes the positive factors for all. Conversely,

6. anticipating resistance by stakeholders to your company or your solution is valuable
to understand early in the process.
Is your advantage superior and sustainable?
Building competitive advantage begins with developing a customer-validated
perspective on the problem and your planned solution. This provides insights on
where to invest your time and resources with your product. It helps you to
understand how to be competitive, which requires consideration of two elements:
the degree of your advantage and the sustainability of your advantage.
What is the degree of your advantage?
Are there better features that you can bring to the market? If a competing product
has five features, it doesn’t necessarily mean that you need those five features plus
several more. Instead, focus on delivering the right set of features. From our
discussion on value innovation, maybe there are one or two features that customers
don’t really value. You can remove those and reinvest your resources into the
features most desirable by customers.
By illustration, when Ray Kroc bought a small, family-owned restaurant chain in
1961, he reduced the number of menu items, retaining only the top sellers: burgers,
fries, and shakes. The limited menu was standardized with the singular goal of
serving food fast. McDonald’s as we know it was born on the premise of fast food,
not low price food. Low prices are difficult for startups to achieve due to the
economies of scale enjoyed by the large incumbents.
If your competitive advantage is based on low prices, be sure that you can
accomplish this in a sustainable way, perhaps based on your operations. Where
there is opportunity for a startup to offer lower prices, and if it’s accompanied by

7. cost advantages in the startup’s operations, supply chain, manufacturing, etc., you
can add real value for customers.
For example, consider your experience of watching movies at home. Several years
ago, many of us went to Blockbuster or our local video rental place, chose our movie,
paid for our movie, went home and watched the movie, and then came back a day or
two later and returned that movie. Netflix brought an alternative movie rental
model to the U.S. in 1997. In its beginning, Netflix was a mail order business.
Customers visited Netflix.com, chose the movies that they would have selected at
Blockbuster, and waited several days for the DVDs to arrive from Netflix via the U.S.
Postal Service. To compensate for the wait, the movie rental rates of Netflix were
cheaper than Blockbuster, and the titles were nearly always in stock. Many of us
were willing to wait a few days on the mail to avoid going to Blockbuster, hoping
that the movie title that we desired was available on the shelf, watch it, and then
travel back to Blockbuster and return it before late fees accumulated.

8. Figure 21. Netflix's Original Website (1999)
While McDonald’s sold speed, Netflix sold convenience and low cost by bypassing
the cost of operating retail stores. Netflix did not compete on the basis of speed—at
least not at first.
Blockbuster eventually launched a mail order feature and later offered online
streaming of movies. They lagged competitors in both of these formats, and they still
carried the expense of their bricks-and-mortar stores. Sure, they could try and copy
Netflix, or copy Redbox’s vending machine model. This would not help Blockbuster
avoid all of the expenses that they were incurring on multi-year lease agreements on
9,000 stores nationwide with 60,000 employees. By comparison, Netflix employees
2,000 today and is valued at $20.64 billion as of January 2015. Blockbuster is
bankrupt and has closed its operations.

9. Is your advantage sustainable?
We also want to consider the sustainability of your advantage. By sustainability, I’m
addressing the relative difficulty for others to copy your advantage. How easily can
an existing or new competitor observe what you’re doing, learn from you, and apply
their resources, know-how, and relationships to replicate your success?
What can you do to make your product difficult to copy? Maybe it’s intellectual
property in the form of patents, trademarks, or copyrights. Perhaps you can build a
strong brand that resonates, that really takes hold in the marketplace. It may be
relationships that you develop. It may be exclusivity agreements that you can sign
with people to whom you are selling your product, or who are supplying you with
parts for that product. There are a variety of ways that you can work to build entry
barriers that make it difficult for those to come later and compete against you.
Consider the sources of your competitive advantage. How are you going to derive
your advantage in the first place?
One way is specialization.
How can specialization create a sustainable advantage?
What I mean by specialization is the opportunity to be different than competitors.
Today, a number of my students have business ideas built on mail-order
subscription boxes. Industry leaders in this area include NatureBox and Dollar
Shave Club. These are models by which you as an individual will go online, pay a
fixed fee per month, typically $20 to $30. You agree to an automatic mailing,
typically monthly, of a box of products of a specific type or category. The mailing
occurs monthly until you cancel the subscription.

10. For the businesses who are providing that product, it’s a great revenue model. If
they can convince a customer to check a box once and enter their credit card
number, they know that every month until that customer cancels that they have a
sale. For every customer that subscribes, they’re going to have steady revenues each
and every month. They can make agreements with their suppliers based on this
predictable demand. They can develop a number of distribution agreements to bring
in new products within their category. We see this model not only in food and
shaving, but in cosmetics, apparel, wine, and educational products and craft
products for kids.
As my students approach me with a new subscription box idea, a quick online
search typically evidences that their idea is not new at all. There are over 3,500
mail-order subscription box companies in the U.S. These companies often offer
multiple types of boxes, resulting in thousands of options available for customers.
The subscription box model has become oversaturated very quickly.
What does excite me is a company called Cratejoy based in Austin, Texas. Cratejoy
does not compete to be the latest in the subscription box market. Cratejoy is one of
the few companies that has made the choice to build the tool, to build the platform,
to be inspired by the picks and the shovels that the gold miners needed in
generations past.
Cratejoy started a software company in the summer of 2013 to support individuals
who want to be the mail-order subscription box company. Those who want to be the
provider of that subscription service can use Cratejoy’s software platform to build a
site, manage inventory, and manage payments. For a monthly fee, Cratejoy provides
a fully integrated service for the hundreds of companies that are chasing the mail-
order subscription market.

11. Figure 22. Cratejoy Website

12. Cratejoy started with two individuals with technology expertise. They applied and
were accepted in Y Combinator’s summer program, a leading startup accelerator.
Approximately a year later, in September of 2014, they raised $4 million in venture
capital to continue to build, scale, and market the business. Again, not trying to be
the latest subscription box service, but trying to specialize as a tool for the emerging
box service companies.
How can localization create a sustainable advantage?
Localization is another opportunity to be competitively different and build
competitive advantage. We see this in international markets where there’s a
domestic product that’s doing well. The example here would be Spotify in the U.S.,
which offers music in an all-you-can-listen model for a low monthly fee. There is a
new competitor in Taiwan, KKBOX. While they offer the same popular music that
Spotify has, KKBOX further differentiated by signing local music labels and entering
into agreements that provide this company with unique access, a unique catalog of
music for their local market. They’re able to anticipate desires and serve individuals
in their home country in a better way than a Spotify could as a non-Taiwanese
company. In this context, it’s specialization to an extent, but even more so, it’s a
localization strategy.
How does the team create a sustainable advantage?
A third source of competitive advantage is the team. If you’re already successful, if
you’re Google or Microsoft, you can recruit great talent and great executives.
Recruiting is tremendously difficult for startups, but incredibly important. As you’re
searching for co-founders, as you’re looking for your first or second employee, you
should be seeking great people. Search for people who are excellent at what they do.

13. What you can expect is a greater likelihood of having excellent products and an
excellent company if you start with an excellent team.
If I were to start an electric vehicle company, I’d like to hire a CTO, a chief
technology officer, who had done great things in this space before. One who had
built and scaled electric vehicle companies before, who understands complex
electrical systems, who understands aerodynamics, and who understands how to
build a competent technology team.
I need a chief financial officer who knows numbers, who understands money, who
understands the automotive industry. The former CFO of Ford of Southern Africa,
which is a $3 billion operation in and of itself, would be a good fit.
A chief designer who knows design is critical. One who has won countless awards,
who has demonstrated that they can design great cars that people will buy and love.
Perhaps the past director of design from Mazda’s North American Design Center,
one of the global centers of excellence for automotive design, who also has design
experience with General Motors and Volkswagen.
I need a person that can build cars well, and build a lot of cars really well. The past
production lead with Lexus, Toyota, Volvo, and Renault fits, as they’ve been
responsible for building over 350,000 cars per year.
I need a procurement expert that understands global supply chains for
manufacturing companies. The former chief purchasing officer for Sony Ericsson
fits.
I want my company to be fun. I want my company to be a place where my colleagues
can come and enjoy what they do, and enjoy their work, and enjoy the company
culture that we can build. What better person to have than the director of staffing

14. operations for Google, who was responsible for growing Google from their early
days up until 2009, and designed the company’s legendary recruitment organization
and talent acquisition strategy.
Tesla Motors doesn’t only build great cars. They build great teams. They built this
great team in the beginning to enable their building of great cars and a great
company.
In summary, think about the degree of your competitive advantage and its
sustainability. Can you do something that is better, cheaper, and/or rarer than
competitors? Can you build something that’s sustainable and difficult to copy? And
can you find sources of advantage either independently or in combination, such as
specialization, localization, and teaming?
Can you build the right team at the right time?
We’re going to further explore teaming as we conclude our discussion on
opportunity identification. Entrepreneurship is a team sport. The belief that it’s the
solo individual out on their own all the time is a myth. Entrepreneurs spend the
majority of their time as part of a group. They’re meeting with management teams,
board members, and project teams. And as the venture grows, they’re spending
more and more time with suppliers, partners, and customers.
How do startups build teams? How do you pick your co-founders? How do you pick
your earliest employees?
Thoughtfully consider who has complimentary interests. Who likes what I like and
who has the passion for what I want to do?

15. Who has contrasting skill sets? Who are people that know things different than me?
Who can complement my weaknesses with their strengths?
Are there differentiated relationships among my team? Will my team members
know more people, and different people, than me?
Think about your reasons for teaming.
You may want to expand or enhance your industry knowledge or domain
knowledge.
You may want to bring someone to the team that understands the customer and the
market, and who understands the competitors and trends.
You may want someone who has the relationships and the social capital. The person
who’s in the know, and knows who to know.
You may want someone who can make a financial contribution. Now, maybe they
are an investor, and only an investor. Maybe they are an investor and they’re going
to be working with the team in a more day-to-day fashion as well.
Should you team with a close friend to start your business? Or bring them on early
in the venture? I would caution you that many times, teaming with friends usually
ends the friendship and kills the business.
There are two questions that I would ask. One, does your friend truly complement
your strengths and weaknesses? Two, if you had the money to hire someone into
that role, would you hire that friend? If the answer to either of these questions is no,
then that’s not a friend that I would bring on to the team.
What is the best approach to team building?

16. An ideal approach is to start with people you know. Only hire people you know.
Particularly as a small team, having a bad hire may be the end of your company. It’s
time and money spent that may be irrecoverable.
Find partners with resources who can commit long-term. Find individuals who are
willing not to take a salary for a period of months or even years: who have the
savings that they can support themselves through the initial growth and scaling of
the venture.
Don’t hire college kids. Find people who have experience.
Integrate people with sales and marketing very early in the process.
Staff your group with people who believe in your mission that aren’t only exploring
for salary.
While all of the above may be ideal, it’s not the reality of most startup.
The majority of the entrepreneurs with whom I advise are first time entrepreneurs.
Typically, they do not know the right people. They have not worked in the
companies, or joined programs, that connected them with the right people. They are
not wealthy, and neither are their friends. And they are unable to afford experienced
hires for their startup.
Be sure to identify the skills that your new venture needs. This takes an honest self-
assessment of what you know, what you don’t know, and what’s critical to your
venture.

17. If you’re starting a technology-based venture, I suggest bringing on technology
talent in a co-founder or full time management position. Beware outsourcing your
core capabilities.
Recruit through a variety of means. You may have friends who have the right skill
set. If they are committed, and have the right skills, complementary interests, and
differentiated relationships, they may be a compelling team member.
Past or present co-workers can be great team members as well. You know their
expertise. You know their work ethic. You know their personalities, and if you enjoy
working with them.
Family members with the right skills, motivations, and relationships can be valuable
team members. However, if you have family who may not be the most reliable, and
have problems in their day-to-day life, I would be hesitant to bring them on to the
team. Be highly selective.
LinkedIn, Facebook and other social networks can be very helpful for finding
individuals. LinkedIn, by being able to index people on expertise, education, and
experience, is a great tool to find people. There may be people who were in your
circle years ago who have gone on to do pretty impressive things that you may not
be aware of. If you connected on LinkedIn, you may find that they’re the perfect co-
founder, or that they’re the perfect individual to join your team later.
You may recruit at face-to-face events. There are a variety of meet-ups, workshops,
speakers, and socials in many different areas. They happen in many large and small
cities globally, as people are more informed about entrepreneurship.
Understand the roles of cash and equity in your venture. You may be cash poor, but
equity rich. What I mean by that is you may not have the cash to bring on

18. individuals. You may not be able to pay a salary. But, every company starts with
100% equity. In that context, you have 100% ownership of your company to
perhaps share with people who will join your team. Consider what it takes to bring
people on and effective ways to bring them on with equity. Consider a vesting
schedule to engage and retain them with your venture.
We also want to create a strong culture by hiring people whom you like to work
with, and who share your values. Those who you think can be long term advocates
and champions of your venture, of your cause, and of the solutions that you want to
bring to market.
There’s also an extended team. The extended team may be your board. It may be
investors, attorneys, accountants, partners, and suppliers.
The extended team is something to be cautious about as well. Hopefully, if you were
to choose a physician, you’re not just going to flip through the yellow pages or
search “physician” on the Internet and pick the first person who comes up and trust
them with your healthcare. However, many entrepreneurs do that when they’re
searching for attorneys or accountants. That’s not the thing to do. Do the same thing
you would do if you were trying to find a physician. Look for people who are
respected, who have references, who may have worked with other individuals
whom you know. I would be as selective with my extended team members as I
would be for my own personal physician.
Why is a board of advisors critical for your success?
A key piece of the extended team is the board of advisors. It gives you a mechanism
to have regular feedback from people who have expertise and insights, and who can
provide an objective and informed level of feedback.

19. A board of advisors doesn’t have a formal role or a formal influence over you. It’s
very different from a board of directors, who may have the legal ability to hire or
fire the executive team, who may have the ability to choose to spend or not to spend
on large scale projects, who may have the ability to approve or not approve
acquisitions or mergers. Boards of directors often have considerable obligations and
authority. Boards of advisors simply advise. And for the early stage entrepreneurs,
that’s what I would suggest starting with. It gives you a rich source of advice that
long-term should help you make money, and should also save you a lot of money
and save you from mistakes and pitfalls along the way.
A board of advisors is also different from a service provider. If you go to a marketing
firm and you want them to market your product, they will create a campaign. They
will suggest what may work. They will attach a price point to it. And they’re happy
for you to pay them $1,000 or $10,000 or $50,000 for them to execute that
marketing plan. A board of advisor member is able to work with you on that plan,
and will ask if it’s going to work or not? What should you do? What shouldn’t you
do? What are other non-marketing things that you can do with that $10,000 that
may add more value to your firm?
If you go to a software development company and ask them to build your dream
website, they will do it. They may be able to do that for $50,000. And they’re happy
to build it. They’ll provide no guarantees that it’s going to be profitable. They’ll
provide no guarantees that you’re going to be able to have traffic on that site and
convert customers on that site, but they’ll take your money to build it. A board of
advisors will look at that plan, look at that wireframe, think about that user
interface, think about the customer experience that that website is going to deliver,
and give you advice on what to do, when to do, how to do, if to do, etc. before you
hire a software development company.

20. Boards of advisors may be compensated. It may be equity based. It may be 0.25% to
1%. It may be cash-based. They are potentially willing to serve as a volunteer for a
short amount of time, if they already have a relationship with you. I would argue
that to really get value out of them, and to really have their attention, and link their
interest and their motivation to you in a measurable and significant way, there’s a
level of equity or cash that most startups are going to need to bring on quality
boards of advisors and to be a priority for them.
In summary, when we think about the team, we want to be very selective. We want
to be very selective with our co-founders as well as the early hires that we make,
particularly those who we are going to give equity to. We also want to be very
selective with our extended team.
We want to beware the pitfalls of friends and family. Yes, there are successful
companies formed by friends. There are successful companies that are run by
families. But it’s not the norm. And it certainly brings a level of complication that
you want to be aware of.
Leverage your relationships to establish your team. Think about whom you know
and if they may be a prospective teammate.
I also want to remind you of this concept of building a board of advisors. It’s a great
way to have expert advice, and advice is something that you can take or leave.